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Encyclopaedia 
of Banking 



Published by 

Encyclopaedia of Banking 
New York City 



"'^^ y vs^ 






ENCYCLOPAEDIA 

OF 

BANKING 

Copyright 1922 



AUG 19 jy22i 



©CI.A677911 



FOREWORD 

The publication of this Encyclopaedia 
of Bemking has been induced and sug- 
gested by its evident need. The so- 
called layman and the persons em- 
barking upon business ventures, have, 
at numerous times, been confronted by 
the inevitable problem of banking in its 
application to themselves. The de- 
sired information is contained herein. 
S, I. L. 



Encyclopaedia of Banking 
Opening an Account — The first prac- ^ funda- 

, , . . . mental 

tical step to a banking transactions is, requirement 
obviously, the "opening of an account." 
Any one of the employees in a bank will 
direct the person who wishes to open an 
account to the officer whose duty it is to 
serve new depositors. 

If it is desired to open a checking 
account, the bank will ask for references, 
such as; former banking connections 
(not a savings bank as they do not 
require identification) or some repu- 
table business man or firm to whom the 
new depositor is known. 
Quite often the question has been asked ^^^^ desirable 

, 11111 • p protection 

why a bank should require references 
from the person opening an account. 
This is necessary for the protection of 
both the bank and the public. For 
instance; a person may open an account 
with the deposit of stolen, worthless or 
forged checks, and immediately wish to 
draw against the account just opened, 

[Page 5] 



Encyclopaedia of Banking 

but unless the bank establishes the 
identity of the new depositor it has 
nothing on which to base its belief and is 
therefore responsible to the maker and 
payee. 

Caution that Account in Trade Name — In order to 

unL^JeZaVg op^^ate uuder a trade name, it is neces- 

deiaif and sary to make apphcation to the county 

annoyance ^jgj.j^ f^j. permissiou to use a particular 

trade name. If the county clerk finds 

that there is another individual or set of 

individuals already doing business under 

that name he will refuse the permission, 

for the reason that it will not only cause 

confusion, but also injure the business of 

those already granted the right to 

transact business under that name. 

Liable Failure to apply for this permission may 
subject one to a heavy fine. It is 
obvious that when a check made pay- 
able to the order of a trade name is 
offered for deposit at the bank, the bank 

[Page 6] 



Encyclopaedia of Banking 

has no way of knowing that the person 
endorsing this trade name on the back 
of the check has been granted the right 
to operate under that name, or that the 
person signing for the trade name has 
the authority to do so, unless a copy of 
the county clerk's certificate is on file 
at the bank. The certificate protects 
the individual and the bank. 



Corporation Accounts — ^An incorpor- Routine of 

business 
principles 



ated business is obliged to provide the *"*"*^" 



bank with a copy of a resolution from 
the minutes of the meeting at which 
those elected were authorized by the 
corporation to open an account in their 
name, and an extract from the by-laws 
naming the officers who are authorized 
to handle the funds of the corporation. 
This resolution should be signed by the 
secretary and should bear the corporate 
seal. Many banks furnish a form pre- 
pared for this purpose which they will 
supply upon request. 

[Page 7 



Encyclopaedia of Banking 



Notify Should any change be made in the 
officers signing checks for the corpora- 
tion, it is essential that the bank be 
immediately notified and a new resolu- 
tion passed authorizing the new officers 
to sign for the corporation. A copy of 
the new resolution must be delivered to 
the bank. 

Do not Signature — In order for one to draw 
lo^r against funds on deposit in the bank, it 
signature is ncccssary to Icavc a specimen of one's 
signature on file with the bank to guide 
them in passing upon the authenticity 
of the signatures on the checks presented 
for payment. It is quite apparent that 
one must be very careful to sign one's 
name in exactly the same way each 
time. 

For example: Should Mr. Jones 
desire to sign "J. J. Jones" instead of 
"John J. Jones," he must first call at 
the bank and leave a specimen of the 
new signature, otherwise the bank will 



[Page it 



Encyclopaedia of Banking 

refuse to honor checks signed the new 
way. 

Power of Attorney — One may desig- ^^thority 

- . entrusted 

nate another person or persons to sign to others 
for him by executing a "power of 
attorney" in which it is set forth that 
the person or persons so designated have 
the power to act for him in all matters 
pertaining to the bank account in the 
same manner as he might or would for 
himself. This arrangement can be ter- 
minated by simply notifying the bank 
in writing of the desire to discontinue 
the power of attorney. 

Pass Book — A "pass book" is the bank ^o record 
book given the depositor by the bank ®^*'*"* 
and in which his deposits are recorded. 
Some banks balance the pass book when 
requested to do so and it then shows the 
state of the account. Other banks mail 
the depositor a monthly statement. 

Bank Book — Same as pass book. 

[Page 9] 



Encyclopaedia of Banking 

^^^ Check Book — A "check book" is a 
printed book of blank checks. 

Checks Issued — The purpose of checks 
is to facihtate, as much as possible, 
their free passing from hand to hand 
like currency. 

A check is an unconditional written 
order to a bank or banker instructing 
them to pay a certain fixed sum of 
money. 
Write plainly p^\\ chccks should be dated the current 
date, (do not date ahead) made payable 
to the order of cash, bearer, one or more 
persons, firm or corporation, real or 
fictitious, for a certain definite amount 
and signed by the maker. 
Checks are usually numbered but 
while this is not necessary it helps in 
locating the check should the occasion 
arise. 
Words and Chccks payable to cash, bearer, payroll. 
'^ ^ ag'rle Tcuts, ctc, are payable to the bearer or 

[Page 10} 



Encyclopaedia of Banking 

holder. The bank, however, may require 
proper identification before payment is 
made if they deem it necessary. 

Every check is presumed to have been 
issued for a valuable consideration, and 
want of consideration in the issuance of 
the instrument (check) is not a defense 
against a bona-fide holder or a holder in 
due course. 

Date — Checks should be dated. If the fhi in date 
check does not bear a date, it is pre- 
sumed to be current date and may be 
inserted by any person. 

Writing or Filling and Figures — Reconcile 
The "writing or filling and figures" on ^^^j^';;/ ""''^ 
each check should agree. When there is 
a difference the bank will sometimes pay 
the lesser amount although it may 
refuse to pay checks drawn in this 
careless manner. While it is possible 
that a person might err when writing 
the figures on a check it is not likely 

[Page 2jl 



Encyclopaedia of Banking 

that a mistake would be made when 
the amount is being written out. To 
safeguard both parties the bank may 
induce the holder to have check corrected 
by the maker. 

Accept Deposits — When accepting checks be 

properly 11 

endorsed Very carciul to see that they are issued 
checks only [^^ ^j^g name of the depositor or are 
endorsed by the person to whom the 
check is payable. If payable to bearer 
it is not necessary for a check to be 
endorsed but it is advisable to secure the 
endorsement of the holder, as it may 
help to identify the party from whom 
received, in case payment is refused for 
some specific reason. 

^^'■^ Banks will not accept checks for deposit 

important • t • i 1 i 11 

by an mdividual that are payable to 
companies operating under trade names, 
or to corporations unless they, the 
bank, have the proper authorization on 
file from the county clerk or corporation 

[Page 12] 



Encyclopaedia of Banking 

in which permission is granted to trans- 
fer funds. 

Where checks are made payable to two variable 

1 • r» 1 . 1 . endorsements 

or more persons it may be specmed that 
the amount of the check is to be paid 
to any one or all of them. In the first 
case, any one endorsement is sufficient. 
In the second, all are required to 
endorse. 

Acceptance of Checks by Bank for Depositor's 
Deposit — The bank merely acts as '° " *' 
agent for the depositor in the collection 
of checks deposited. The entering of 
the amount in the pass book, however, 
does not relieve the depositor from 
liability should the checks be returned 
unpaid. Some banks specify this in 
their pass books and on their deposit slips. 

Post-Dated Checks — A check that is ^ bad 
dated ahead is a "post-dated check." ^'■"*^''*^® 
It is usually given when the maker has 
not sufficient funds in the bank, at the 

[Page IS] 



Encyclopaedia of Banking 

time he issues it, but expects to have at 
the time of its date. 

^° A post-dated check is invaHd if it be 
alter altered so as to make the time shorter, 
even if the change of date is but one 
day. When a check is post-dated the 
maker does not guarantee that he has 
the money on deposit to meet the check 
and therefore the holder of same takes it 
free from equities. 

A post-dated check may be considered a 
"bill of exchange." 

Avoid Altered Checks, Drafts and Notes— 

alterations rrii , , ,, . i • i 

Ihe bank usually exercises the right to 
refuse to pay any checks, drafts and 
notes that have been altered for the 
reason that very often it cannot deter- 
mine whether the alteration has been 
made by the drawer, depositor or some 
other person. The bank paying such 
an instrument does so at its own 
risk. 

[Page 14] 



Encyclopaedia of Banking 

Check or Note to Fictitious Person — inadvisa 
A check or note payable to "John 
Smith or Bearer," or payable to "Cash," 
or "X Y Z," or "Oliver Cromwell" 
(a non-existing person) is what is 
termed to be made payable to a "Ficti- 
tious Person" and is actually payable to 
"Bearer." 

Overdrawn or Overdraft — "Over- Avoid th 
drawn" or "overdraft" is the term in 
common use when a check issued ex- 
ceeds the sum against which it is 
drawn. The bank, of course, is obliged 
to return such checks, the result of 
which reflects upon the credit standing 
of the maker and should be guarded 
against. 

Drawing Against Deposits — Sufficient Adhere 
time should be allowed for the collection ^*"*^*^y 
of checks deposited before drawing 
against them. The receiving teller 
will be glad to advise of the length of 

[Page 15] 



Encyclopaedia of Ban kin c; 

time required for the collection of 
checks on any given point. 

It is very annoying to a bank to be 
obliged to return a check for insufficient 
funds. This not only is an incon- 
venience to the bank but greatly reflects 
upon the credit standing of the 
maker. 

He pays Payer — A "payer" is the person, firm 
or corporation who pays, or issues an 
order to pay. 

Denotes Endorsements — A check, note or draft 
is considered endorsed when the person 
or persons to whom it is payable have 
written their name or names on the back 
of the instrument. 



Endorser's Blank Endorsements — A check is en- 
dorsed in * 'blank" when the person to 
whom it is payable has written his 
name on the back of the instrument. 

\Page 16] 



Encyclopaedia of Banking 

The check then may be given by the 
holder to another, and he in turn may 
negotiate the check by endorsing his 
name in the same manner underneath 
the first endorsement. The second hold- 
er could, if he chose, turn the check over 
to a third party without endorsing it as 
the first endorsement made the check 
payable to bearer. 

However, it is not good practice to ^<*t oood 
accept a check without the endorsement 
of the individual from whom it is 
received. 



secure 



Special Endorsement — When the ^°"^f ' ""** 
payee or holder of a check specifies to 
whose order the money is to be paid, 
signing his name underneath, the person 
so designated must in turn endorse the 
check in order to secure the money. 
For instance, a check issued to "John 
Jones" and he (John Jones) in turn 
wishes to make this check payable to 

[Page 17] 



Encyclopaedia of Banking 

"James Brown" he would endorse it as 
follows : 

"Pay to the order of 

James Brown 

John Jones" 

This form of endorsement is legally and 

practically correct and safe, and is 

preferable to other forms of endorsement. 

One signature Partnership Endorsements — Checks 
sufficient ^g^ygj^iQ iQ g^ partnership need only be 
endorsed in the name of the partnership 
by one of the partners, so long as one is 
convinced that the endorser is a partner 
of the firm. Only the firm name need 
be written as, for example: "Brown & 
Jones." This constitutes a legal en- 
dorsement. 

An officer' 8 Corporation Endorsements — Checks 

function pg^yg^jjjg iQ Q^ corporation must be 

endorsed by the officer or officers of the 

corporation who have been given such 

authority- A properly worded rubber 

[Page 18] 



Encyclopaedia of Banking 



stamp is an acceptable endorsement for 
deposit only. 

Individuals must not accept checks /^""»"«'«"rf 
payable to corporations unless these "^'^^^^^^ 
checks have been transferred by en- 
dorsement by the officer or officers of the 
corporation who have been given cor- 
porate authority to transfer their funds 
in this manner. 

Qualified Endorsement — A "qualified Recognition 
endorsement" constitutes the endorser a 
mere assignor of the title to the check, 
note or draft. It may be made by 
adding to the endorser's signature "with- 
out recourse" or any other words of 
similar import. 

The negotiability of the instrument is 
not impaired by such endorsement. 
The endorser in this case is not liable. 



liability 



Restrictive Endorsement — A "restric- 
tive endorsement" is one which sets 
forth that the amount on the check is to 



Limited to 
transferee 



[Page 19 



Encyclopaedia of Banking 

be paid only to the person designated. 
As for instance: a check issued to 
"John Smith" who wishes it to be paid 
to *'John Doe,"^ would be endorsed as 
follows : 

"Pay to John Doe only 
John Smith" 

A third party Restrictive Endorsement in Trust — 

This form of endorsement is sometimes 
referred to as "third party endorsement.', 
As a matter of convenience, if a person 
is out of town and the holder or owner of 
a check wishes it to be deposited to this 
specific person the restrictive endorse- 
ment in trust, if the holder or owner be 
John Doe, would read as follows: 
"Pay to Blank Bank 
For the account of 
John Smith 
John Doe" 

Third Party Endorsement — Same as 
"restrictive endorsement in trust." 

[Page 20] 



Encyclopaedia of Banking 

Accommodation Endorsement — Any ^^'"^ ®'"*^" 
one who makes a note or endorses a 
check, draft or note, lends his name to 
the transaction, and should the instru- 
ment in question not be paid, he is 
liable even though he has merely done so 
for the purpose of accommodating others 
and has received nothing of value for 
the use of his name. 

Irregular Endorser — An "irregular en- ^« 

, ,, . , . ,1 • unwarranted 

dorser is a person who not otherwise ^isA: 
a party to an instrument, places thereon 
his signature in blank before delivery. 
Such a person is liable as an endorser as 
follows : 

a If the instrument is payable to 
the order of a third person, he is 
liable to the payee and all subse- 
quent parties. 
b If the instrument is payable to 
the order of the maker or bearer, 
he is liable to all parties subse- 
quent to the maker. 

[Page 21 



Encyclopaedia of Banking 

c If he signs for the accommodation 
of the payee, he is hable to all 
parties subsequent to the payee. 

^^* Conditional Endorsement — A **con- 

customary ,. . , , ,, . , . , 

or acceptable Qitional endorsement is one which 
sets forth that the money is to be paid 
only upon performance of some agreed 
condition, contract or agreement. 
For instance: John Doe issuing a 
check to himself would endorse it as 
follows : 

"Pay John Smith 
upon completion 
of his contract 
John Doe" 

This form of endorsement is very 
uncommon and is not acceptable by a 
bank. 

Responsi- ^jthout Recoursc— This term is usu- 

bility ended i- i i • 

ally applied to a person endorsing an 
instrument for transfer and beyond 
which he cannot be held liable. 

[Page 22] 



Encyclopaedia of Banking 

Misspelled Name — Where the name of Prevent this 
a person on an instrument is misspelled, 
the payer may endorse it the misspelled 
way and add his proper signature. 

Stale Checks— It is important that all ^« '* "^^^ 
checks be presented for payment or 
deposited immediately upon receipt as a 
bank may exercise the right to refuse to 
honor checks bearing an old date. Such 
checks are known as "stale checks." 

Endorsee — An "endorsee" is one in 
whose favor endorsement is made. 

Certified Checks — A "certified check" The holder's 
is one that bears on its face the rubber ^'^'^'^^^^ 
stamp of the bank on which it is drawn, 
certifying that the signature is genuine 
and that the amount has been charged 
against the maker's account and placed 
in a special fund. 

If a holder has a check certified the 
maker of the check and previous en- 



[Page 23] 



Encyclopaedia of Banking 

Certification doFseis are released from liability and it 
becomes an obligation of the bank. 
This applies in all cases except where 
the maker of the check has it certified 
and then negotiates it. In this case if 
the bank should fail the maker would 
still be liable. 

A check is usually certified for the reason, 
that a doubt exists in the mind of the 
holder as to the worth of the maker, or 
that he desires to use the funds im- 
mediately. 

A bank cannot certify a check dated 
ahead any more than it can pay a check 
dated ahead. 

Anaccom- Casliicr's Chcck — A "cashier's check" 

modation . . 

is a national or state bank s own check 
issued in exchange for money or its 
equivalent and is similar to all others in 
form. It is considered the same as 
cash so long as the party to whom it is 
payable can identify himself. 

[Page 24] 



Encyclopaedia of Banking 

A "cashier's check" is used by a bank to 
pay its own bills and is issued to its 
depositors for their convenience. 

Treasurer's Check — A "treasurer's ^convenience 
check" is a trust company's own check 
issued in exchange for money or its 
equivalent and is similar to all others in 
form. It is considered the same as 
cash as long as the party to whom it is 
payable can identify himself. 

Trust companies pay their own bills 
with treasurer's checks and they are 
issued to its depositors for their con- 
venience. 

Lost or Stolen Checks — Payment by Notify bank 
a bank of a "lost or stolen check" '*^^"^'** " 
payable to bearer or cash, or a check 
that needs no further endorsement, 
without notice, does not render the 
bank liable. 

Stop Payments — In order for a bank ^o a 
to "stop payment" on a check, it is ^''^"^^* " 

[Page 25] 



Encyclopaedia of Banking 

essential for the maker to direct the 
bank in writing at which time the bank 
must be furnished with a complete 
description as to: number, date, to 
whom issued and amount. 
Be explicit The bank cannot be held responsible 
for the payment of a check on which 
payment has been stopped if the written 
description does not correspond in every 
detail with the check. 

Issue substi- Jf payment has been stopped on a lost 
check and this check is later found, the 
order to "stop payment" may be 
revoked in writing and the check will be 
honored. It is advisable, however, to 
issue a new check bearing a different date 
and number notifying the bank that this 
has been done. 

An advantage In Order to allow Sufficient time for the 
maker to stop payment on his check, 
there is a standing rule in banks that 
checks will not be cashed except between 
regular banking hours. 

[Page 26] 



Encj^clopaedia of Banking 

Stop Payment hj Telejrraph — As a ^^/^edient 

'"" - - proceeding 

request to stop payment by tele- 
graph" is necessarily in writing, it is 
therefore perfectly proper and legal to 
stop payment of a check by telegraph. 
It is advisable to confirm such instruc- 
tions by letter enclosing ' copy of 
telegram. 

Stop Payment by Telephone — Banks ^^* 
will not stop payment on checks if 
instructed to do so by telephone. It is 
entirely possible that a person having 
knowledge of checks issued may, as a 
hoax or for the purpose of serious 
annoyance, attempt to stop payment on 
them by simply telephoning the bank. 
It is obvious that the bank is not courtesy 
obliged to heed such instructions unless ^^ ^""*^ 
convinced that the person telephoning 
is the maker of the check and then only 
upon agreement that he will confirm 
same in writing by the following morn- 
ing at the latest. 

[Page 27] 



Encyclopaedia of Banking 

The Payee — A "payee" is the person, firm 
or corporation to whom the order is 
made payable, or is the receiver of 
moneys. 

Safeguard Forgcry — The bank is obhged to know 
signature the signature of each depositor and if it 
pays a check on a forged signature of the 
maker the bank must bear the loss. A 
bank must also bear the loss if it pays 
a forged check to an innocent holder. 

Your accourvt Reconciling a Bank Account— It is 

must tally , "^ 

with bank vcry important that the balance as 
shown on depositor's check book agrees 
with the balance in the bank. In order 
to obtain this information a statement 
should be secured from the bank about 
once each month and immediately 
proven with the check book. 

An easy method is as follows : 

Arrange the cancelled checks returned 
by the bank according to number, com- 

Page 28] 



Encyclopaedia of Banking 

pare them with the stubs in the check 
book and make a list of all checks which 
have not been returned by the bank; 
these are known as outstanding checks. 
Next subtract the total of the outstand- 
ing checks from the balance on the 
bank statement and the amount arrived 
at should agree with the balance in the 
check book. If they do not agree, 
after having carefully verified additions 
and subtractions, take it up with the 
bank immediately for correction and 
reconciliation. 

Charges for Carrying Small Ac- Ordinary 
counts — The average monthly balance ^'"dimenf 
of a depositor's account must run above 
a minimum average established by the 
bank, below which the bank cannot 
carry the account without a loss to 
itself. In view of this, banks generally 
have been forced to make a monthly 
charge for accounts that run below the 
bank's fixed minimum balance. 

[Page 29] 



Encyclopaedia of Banking 

To prevent jhis charge is justifiable in that the 
bank, as any other commercial institu- 
tion, cannot run its business at a loss. 
Unequivocal Assumcd Name — A person signing an 
"assumed name" to an instrument is 
liable to the same extent as if he had 
signed his own name. 

A convenient Drafts — A. "draft" is a written order 
arrangement gigngj j^y ^h^ maker who is kuown as 
the "drawer," payable to himself, or his 
bank, instructing another to pay a 
certain fixed sum within a specified 
time. It may be drawn at sight (current 
date) or a certain number of days or 
months after sight. The person in- 
structed to pay the money is called the 
"drawee," and the party to whom it is 
payable is called the "payee." 

A mode of Sight Draft Attached to Bill of 

upon^d^very Lading — A "bill of lading" is a written 
receipt issued by a railroad or common 
carrier to the shipper of merchandise, 

{Page 30] 



Encyclopaedia of Banking 

setting forth the manner of shipment, 

the rules and regulations governing the 

shipment, and a description of the 

merchandise. 

It is quite usual to sell goods to an ^^""^^on 

, ^ ^ , f , negotiation B 

individual at a distant point, with the 
understanding that a draft will be drawn 
on the buyer payable to the order of the 
seller or his bank, or some other party 
specified. 

The railroad or common carrier, upon ^«'»'= 
receipt of the goods from the seller, 
issues a bill of lading as described above. 
The bill of lading is then endorsed by 
the seller who attaches same to a draft 
drawn on the buyer and delivers it to his 
(the seller's) bank for collection. 

Sight Draft— A '*sight draft" is a 
draft payable upon presentation. 

Time Draft — A "time draft" is one 
that is payable a certain number of 
days after sight. 

[Page SI] 



Encyclopaedia of Banking 



Purposes 
unlike 



Procedure of Purposc of Draft — The principal use 
collecting ^£ ^ ^^^^^ j^ ^^^ collectioii, through a 

bank, of moneys due. This has become 
a common method of collecting unpaid 
accounts. 

It differs from a check in that the draft 
directs a person, firm or corporation to 
pay the amount specified to the order of 
the drawer, or the order of a bank, 
whereas a check directs a bank or 
banker to pay the sum indicated. 
Should the drawee not accept the draft 
it may be protested in the same way as 
a check. 

Drawer — A "drawer" is the person, 
firm or corporation who is the maker of 
the draft. 

Drawee — A "drawee" is the person, 

firm or corporation upon whom a draft 

is drawn. 

Acknowiedg- Acceptance of Draft — The draft as 

acceptance Originally drawn is of no value until 



[Page 32] 



Encyclopaedia of Banking 

it has been presented for acceptance. 
If the drawee desires to accept the draft 
and wishes to pay it, he signifies his Approval 
intention by writing the word "accepted' ' *=°"^'"'"^'' 
across the face of the draft, inserting 
the date, specifying the place at which 
he will pay it, and then signing his name. 
If the draft is drawn "at sight" it may 
immediately be presented at the place 
designated for payment and if payment 
is refused it may be protested. 
In case it is a "time draft" the drawee 
has the right to take the time specified 
before arranging for payment. 
The acceptance of the draft may be 
made on a separate piece of paper. ^"««^''*««*' 
In this event it is advisable that the ac- 
ceptance be made in the presence of 
others. This will then be considered a 
valid acceptance. 

It has also been held that acceptance 
by telegraph is legal, although these 
cases are unusual. 

[Page 33] 



Encyclopaedia of Banking 

Provisional The acceptaiice of a draft may be made 
agreement cQ^ditional upon the performance of a 
contract or agreement between the 
drawer and the drawee. In the accep- 
tance the drawee may specify that the 
money be paid out of a special definite 
fund, and in this case the drawer is 
limited to this special fund for payment. 
The drawee usually has twenty-four 
hours in which to accept or refuse. 
Should he hold the draft and refuse to 
return it. this is considered an acceptance. 

Becomes Acceptor — An "acceptor" is the one 
who by his signature signifies acceptance. 

A means of RiU of Exchange — A "bill of exchange" 

settlement . i i i 

is an order drawn by one party upon 
another for the payment of a certain 
sum at a given date. There are two 
forms — "foreign" and "inland." 

A "foreign bill of exchange" is drawn 
in one country or state and payable in 
another. 

[Page 34] 



Encyclopaedia of Banking 

An ''inland bill of exchange" is drawn 
and payable in the same country or 
state. 

Promissory Note — A "promissory Form of time 
note" is a common form of negotiable ^°^'"*"* 
instrument. It is a promise to pay 
a certain fixed and determinable sum at 
a specified time, to the order of an 
individual, partnership or corporation, 
at a definite place. 

When accepting the note of a corpora- ^^^^^v 

, . . . . authority 

tion or partnership it is very important 
that the acceptor of the note be con- 
vinced that the officer or officers of the 
corporation, or member of the partner- 
ship, executing the note, are properly 
authorized to do so. 

Interest on Notes — The rate of interest 
on a note must not exceed the rate 
specified by the law of the state in 
which the note is payable. 

[Page 35] 



Encyclopaedia of Banking 

A note may be drawn payable with or 
without interest. 

Charge for Discounts — When a bank takes interest 
'*""* in advance it is called "discount." A 
note is discounted by a bank when it 
deducts from its face value, in advance, 
the interest from date of discounting 
to maturity. This transaction is per- 
fectly proper and legal, providing the 
interest deducted does not exceed the 
legal rate. 

Maturity — When time fixed for pay- 
ment becomes due. 

Aids business Trade Acceptances— For years the 

development mi* i • <• 

custom prevailed m this country of 
selling goods on open book accounts. 
The seller frequently had to wait 
considerable time to get his money and 
was therefore unable to expand his 
business as rapidly as he could have. 
To overcome this difficulty the trade 

[Page 36] 



Encyclopaedia of Banking 

acceptance, long used by the business 
men of Europe, was introduced. 

The buyer draws a draft on himself Practical 

payable to the order of the seller, then remittance ^ 

accepts the draft in the usual way and 

delivers it to the seller. The seller of 

the merchandise is then in a position to 

take this trade acceptance to his own 

bank and have it discounted. Should 

the acceptance not be paid at maturity 

the seller need not prove that the buyer 

gave it to him for merchandise as a 

printed statement on the acceptance 

establishes this fact. The discounting 

of the acceptance by the bank, of 

course, depends on the credit standing 

of the buyer and seller. 

Commercial Paper, Negotiable Having 
Paper or Instrument— "Commercial «»««'<="«'«« 
paper,'* "negotiable paper," or "instru- 
ment" is the banking term applied to 
checks, notes, drafts, bills of exchange, 

[Page 37] 



Encyclopaedia of Banking 

bills of lading or any paper of similar 
import. 

Accepts in Holder in Due Course — A "holder in 

good faith ,, . u i . i 

due course is one who has taken an 
instrument under conditions: 

a That it is complete and regular 
on its face. 

6 That he became the holder of it 
before it was overdue, and if it 
had been previously dishonored he 
had no notice of such a fact. 

c That he took it in good faith and 
for a valuable consideration. 

d That at the time he received it 
he had no knowledge or notice 
of any defect in the title of the 
person negoti- ating it. 

Transferee — A "transferee" is the one 
to whom an instrument has been 
transferred. 

[Page 38] 



Encyclopaedia of Banking 

Exchange on Checks, Notes and 
Drafts — All banks that are members of 
the clearing house or members of the 
Federal Reserve Bank are obliged to 
make a charge sufficient to cover the 
cost of collection of certain out-of-town 
items. This charge is called "exchange" 
and varies from Ko of 1% to 34 of 1%, 
depending upon the town upon which 
the instrument is drawn. 

Protests of Checks, Notes or Drafts — Refusal of 
The protesting of a check, note or ^°*'"^"* 
draft by a notary public is sufficient 
evidence to prove that the instrument 
actually was presented at the proper 
place and acceptance or payment re- 
fused. Any and all endorsers are held 
liable for its face value. 

The notary public is obliged to send a Necessary 
notice to the maker or drawer, and all 
endorsers, stating that the instrument 
had been presented and payment or 

[Page 39 



notice 



Encyclopaedia of Banking 

acceptance refused. A small fee is 
made by the notary for this service 
which is charged to the maker or drawer 
of the instrument. The notary's notice 
may be used as evidence in case of 
lawsuit. 

Negotiable — The term "negotiable" is 
applied to commercial paper or instru- 
ments such as checks, notes, drafts, 
stocks or bonds, etc., that the holder 
thereof can transfer either by endorse- 
ment or delivery so as to vest the legal 
right thereto to the transferee. 

A holder Bearer — A "Bearer" is one who holds 
and presents for payment a note, check, 
draft or other instrument which has 
been properly endorsed or is made 
payable to the holder. 

Cost for Interest — "Interest" is the amount 

use of rr^or^ey ^.^argcd for thc usc of moucy, and the 

rate fluctuates like the price of any 

commodity. An unusual and heavy 

[Page 40] 



Encyclopaedia of Banking 

demand for funds will cause the rate to 
rise. On the other hand, a plentiful 
supply of money will bring about a 
reduction in rate. 

There is a law in all States fixing the Locations 
rate of interest that may be charged. ^^^Jrest 
In the Eastern States the usual rate is 
6%, but in the South and West as high 
as 12% has been held not usurious. 

Interest is usually figured on the basis of 
360 days to the year. 

Face Value — "Face value" is the 
amount for which an instrument is 
drawn. 

Bona-fide Holder — A "bona-fide Rightful 
holder" is the genuine holder or a ^********^'" 
person who holds an instrument in good 
faith. 

Certificate of Deposit — If the amount 
in one's bank account is more than 

[Page 41] 



Encyclopaedia of Banking 

sufficient for current requirements a 
"certificate of deposit" may be had. 

Higher fhe "certificate" issued sets forth that 
^allowed the funds are to be repaid either on 
demand or at the expiration of a specified 
time, with interest at a rate higher than 
that ordinarily paid on checking 
accounts. 

The interest rate on "demand cer- 
tificates" is usually somewhat lower 
than on "time certificates." The par- 
ticular advantage in this form of ac- 
count is that interest begins on the day 
the money is deposited and runs until 
the money is withdrawn. 

Loans — A "loan" is the amount of 
money that a bank advances for tem- 
porary use. 

Complete Credit — Banks are in need of certain 
"* ^e^entiai information to enable them to decide 

[Page 42] 



Encyclopaedia of Banking 

upon the credit responsibility of persons 
applying for credit. 

In order to borrow on one's note or the Prepare for 
notes of others, proper provision should 
be made beforehand, for such an emer- 
gency, by regularly submitting complete 
financial statements to the bank. 

In this way the bank is enabled to make 
comparisons of the applicant's business 
growth and determine the amount they 
would be justified in advancing. 

A reputation for meeting one's obliga- confidence 
tions promptly cannot fail to create a ^^fl'^^* '^"«' 
favorable impression that will be of 
advantage for future accommodations. 

Borrowing Money on Security — Listed stocks 
Banks as a general rule do not like to 
lend money on real estate as they feel 
that loans of this character should be 
arranged for through mortgages. Real 
estate does not make a good asset as 

[Page 43] 



and bonds 
preferable 



Encyclopaedia of Banking 

very often it is not readily salable with- 
out great sacrifice. Bonds and stocks 
of well known corporations having a 
. ready market, such as those Hsted on 
the Stock Exchanges of the principal 
cities in the country, are best suited 
for loans of this character. The amount 
of money advanced on these securities 
is based upon a percentage of their 
current market value. The usual prac- 
tice is to lend 80%. This rule is prac- 
tically universal, except in the case of 
Liberty Bonds, in which case it is pos- 
sible to borrow as much as 90%. It is 
usual to draw a note for ninety days 
with the privilege of renewal if a reduc- 
tion is made in the amount of the loan. 

Negotiable Bouds payable to bearer require no 
ip/ien assignment or endorsement. Bonds or 

endorsed ^ 

stocks when they are registered in the 
name of an individual must be placed 
in a negotiable form. This is done by 
executing what is called a bond or 

[Page 44] 



Encyclopaedia of Banking 

stock power, in which the right, title 
and interest is assigned to the bank, 
enabHng the bank to realize upon the 
security should the borrower default. 

A bank requires a margin of 20% over auow ample 
and above the amount loaned, to be '"«'"^*" 
maintained at all times, and therefore 
should the market price of the securities 
pledged depreciate to any extent in 
value, the borrower may be called upon 
to either deposit more security, or make 
a payment on account of the loan in 
order to maintain the required margin. 

Borrowing Money Without Security Banker and 
— When "borrowing money without se- 
curity," of necessity the viewpoint of 
the banker must be entirely opposite 
that of the borrower, in that the money 
which the bank lends is not its property 
but the property of its depositors, to 
whom they are responsible and, there- 
fore, in advancing money without secur- 

[Page 45] 



Encyclopaedia of Banking 

ity the banker in the main considers the 
following : 

a The length of time the applicant 
for credit has been a depositor. 

h The average balance carried since 
the account was opened. 

c The credit standing as reflected 
by reports of reputable commercial 
agencies and general reputation 
in the trade. 

d Financial condition as shown by 
the applicant's statement. 

A bank does not feel justified in lending 
money to a new depositor for the reason 
that it may not have had sufficient 
time to get acquainted and form an 
opinion of his character and business 
acumen. 

Average The established custom among banks 
balance j^ ^^ \ej\d to an individual, firm or 

[Page 46] 



Encyclopaedia of Banking 

corporation about four times as much 
money as the average balance main- 
tained. Should a bank advance money 
beyond this amount it is obvious that 
its loans would soon reach a point 
where they would be prevented from 
granting credit to other applicants 
worthy of accommodation. 

It is quite usual for the banker to be Post record 
met with the statement on the part of 
the borrower that he never thought it 
worth while to submit a financial state- 
ment to a credit agency. This attitude 
is all right so long as he has ample capital 
to carry him through all kinds of 
financial weather, but very few business 
men are in this position. On the 
other hand, a bank finds it convenient 
to go to a credit agency for the com- 
mercial history of the applicant and will 
further ask for the names and addresses 
of the principal people from whom 
merchandise is purchased in order that 

[Page 47] 



Encyclopaedia of Banking 

they may communicate with them as 
to how they regard his credit standing. 

Current The items of one's financial statements 
which help the banker to determine the 
worthiness of credit are, among assets, 
the bank balance, accounts receivable, 
notes receivable, merchandise, and any- 
thing else which he may possess that is 
readily salable. These items are known 
as "current quick assets." 

Current Qn the liability side are the accounts 
payable, notes payable, and any other 
liabilities which may become due shortly. 
These items are known as "current 
quick liabilities." 

A good financial statement should show 
current quick assets to be about twice 
as much as the current quick liabilities. 
The banker is concerned with these 
only, for the reason that should the 
borrower be unable to meet his obliga- 
tions promptly he then feels that the 

[Page 48] 



Encyclopaedia of Banking 

borrower has something on which the 
bank can promptly reahze. 

It is an estabhshed fact that furniture ^«'"« f «*- 
and fixtures depreciate rapidly and very 
little can be realized on their sale. 
Good will is of little value until one 
wishes to retire from business and even 
then the valuation to be placed on it 
depends more on the opinion of the 
buyer than the seller. 

It is no longer banking policy to allow i^oan 
one man to pass upon loans. Practic- *^®'"'""'*® 
ally all banks have a "loan com- 
mittee" and all applications are 
presented to them for decision. About 
three or four days should be allowed 
after application has been made, for 
study of the data in hand, before the 
bank can decide the amount they are 
warranted in lending. 

Kinds of Securities and Their Pur- 
chase and Sales — The word "securi- 

[Page 49] 



Encyclopaedia of Banking 

ties" is a term usually given to bonds 

and stocks of nations, states, cities, 

railroads, public utilities or industrials. 

Bonds and ^ boud is piactically the note of a 

coupons . T xi- 

government or corporation. In the 
case of a corporation the bond or note 
is very often, though not necessarily, 
secured by a mortgage on their prop- 
erty or by a pledge of securities possess- 
ing a ready market. Instead of receiv- 
ing interest on bonds in the form of a 
check, little oblong pieces of paper 
called "coupons" are attached to the 
bond or note and are usually payable 
every six months or quarterly (every 
three months) . 

Since the introduction of the Income 
Tax in 1913, it is necessary to file what 
is called an "ownership certificate" 
with these coupons when depositing or 
cashing them. 
Ownership ^g ^^le form of certificate to be filed 

certificate . 

depends upon the particular corporation 

[Page 50] 



and activity 



Encyclopaedia of Banking 

in question, and the capacity in which 
the holder is acting, and whether or not 
the holder is a citizen of the United 
States, inquiry should be made at the 
bank for a supply of the necessary 
forms. 

Many bonds though listed on the Stock Trading 
Exchange do not enjoy a very active 
market, and very often there is a differ- 
ence of two or three points (the term 
"points" is the common one in use and 
means either dollars or cents depending 
upon whether the market price is 
quoted in dollars or cents), and in some 
cases more, between the price bid by 
those who wish to buy and the price at 
which the security is offered by others, 
for sale. If it is desired to sell quickly 
the "bid price" must be accepted- 
The reverse is true if one wishes to 
buy. In an active market the difference 
between the bid and asked price is 
greatly reduced. 

[Page 51 



Encyclopaedia of Banking 

Relative Bonds are usually quoted on a basis of 
so much for each $100 bond. If the 
price is 65%, it means that $65,873^ will 
be paid for each bond in the denomina- 
tion of $100, or $658.75 for a bond of 
$1,000 denomination. 

Sale of bonds j^ practically all cases the seller is 
entitled to interest from the last date 
on which the coupon was due and 
payable up to the date of sale. The 
only exception to this rule is where the 
payment of interest on the bond is 
dependent on some condition set forth 
in the bond itself. A commission is 
charged on the face value of bonds. 
In the event of sale this commission 
is deducted from the amount received 
for the bond and added to the cost of 
the bond in the case of a purchase. 

Preferred and gtocks are broadlv classified as "pre- 

common "^ * 

stock f erred" and "common." The holder of 
stock is the owner to the extent of his 

[Page 52] 



Encyclopaedia of Banking 

holdings in the net assets of the cor- 
poration. Preferred stock usually car- 
ries with it the right to receive dividends 
before any dividends may be paid on 
the common stock, and has a prior lien 
upon the net assets of a corporation. 

A corporation is not obliged to pay Dividends 
dividends unless, in the opinion of its 
directors, the financial condition of the 
corporation warrants such payment. 
There are some stocks, the dividends 
on which are guaranteed by other 
stronger and bigger corporations, but 
these cases are comparatively few. 

In order to make stock certificates saies of stocks 
negotiable, or when selling, it is neces- 
sary that they be endorsed on the 
reverse side by the registered owner 
exactly as the name appears on the 
face of the certificate. If the purchaser 
desires that the stock be registered in 
his name he is required to present the 

[Page 53] 



Encyclopaedia of Banking 

certificate at the transfer office of the 
corporation and a new certificate is 
issued to him in his name, the old 
certificate being cancelled. It is not 
absolutely necessary to have the stock 
transferred, although advisable, if the 
purchaser expects to hold the stock any 
length of time. All endorsements on 
the back of the certificate must be 
guaranteed by a well known bank or 
stock exchange house before the transfer 
office of the corporation will accept it 
for transfer. Many stocks are regis- 
tered in the names of stock exchange 
houses and the signature of those 
authorized to sign for them are on file 
at the transfer office. A certificate of 
stock registered in this way may change 
hands numerous times in the course of a 
year without ever being presented for 
transfer. 

Ttading units g^Qcks are traded in on most Exchanges 
in units of 100 shares. They are quoted 

[Page 54] 



Encyclopaedia of Banking 

on the basis of so many dollars per 
share. Smaller amounts than 100 shares 
may be bought or sold, with this differ- 
ence that when sold it is necessary to 
accept from 12 J^ cents to 50 cents less per 
share, and when bought it is necessary 
to pay from 123^ cents to 50 cents more 
per share depending upon the particular 
security. 

As in the case of bonds a commission is 
charged when stocks are bought and 
sold and the fee depends upon the 
market price not the par value. 

Your bank will buy or sell securities of Bank's service 
this character through reputable brokers °''^* 

. -, IT' 11 X • depositors 

Without additional charge. It is part 
of their service and a valuable protection 
to their depositors. When selling secur- 
ities, it is necessary to leave the actual 
bond or stock certificate with your 
bank or broker in order that it may 
be delivered promptly when the sale is 

[Page 55 



Encyclopaedia of Banking 

effected. When purchasing securities 
immediate dehvery is very often de- 
layed due to the fact that many securities 
are purchased from brokers who may be 
situated at more or less distant points. 

Consult In view of the fact that full payment is 
required when the order is placed for the 
purchase of securities one cannot be too 
careful in choosing a reputable broker, 
and as banks extend the courtesy of such 
service it is by all means advisable to 
have the bank handle the transaction, 
relieving one of responsibility and pos- 
sible anxiety due to slow delivery. 
The same applies to sales of securities. 

Funds Escrow Agreements — An * 'Escrow 

released when , ,, n i . , m 

agreement agreement usually but not necessarily 
fulfilled involves a bank and two or more per- 
sons. Suppose John Jones and William 
Brown are strangers, and Jones ap- 
proaches Brown upon business involving 
the delivery of securities, deeds to 

[Page 56] 



Encyclopaedia of Banking 

property, or the payment of money to 
Brown, contingent upon the performance 
by Brown of some particular deed or act. 
Brown, not knowing Jones, might ask 
Jones to deliver these securities, etc., 
to a third party, to be kept by the third 
party until he, Jones, has satisfactory 
evidence that the deed or act has been 
performed. This third party would 
undoubtedly be a bank, and the written 
agreement entered into by the two 
individuals and the bank would be 
called an "escrow agreement." 

Letters of Credit — A "letter of credit" convenient 
is issued by a bank or banker, and 
signed by the proper officer, for the safe- 
guarding of funds for the traveling 
public. 

As the name implies it is a "letter," 
on the first page of which it instructs 
the bank's correspondents all over the 
world to honor the drafts of the person 

[Page 57] 



Encyclopaedia of Banking 

or persons indicated therein up to the 
amount noted. It is usually issued for 
the term of one year. In some instances 
the signature is written on the letter 
of credit and in other cases on a separate 
card, inserted in a leather folder, bearing 
the signature for identification. A list 
is furnished of the banks and bankers 
who are authorized to cash the drafts. 

Preferable Upou presentation of the letter of credit 
actuarmoL7y ^^^ ^^^^ spccimcn signature card, if 
any, the amount required may be 
drawn, the payment being noted on the 
letter of credit. Should the full amount 
specified be drawn the letter of credit 
is held by the bank or banker cashing 
the last draft, which completes the 
transaction. In case the total amount 
is not drawn the balance will be remitted 
by the issuing bank or banker. A small 
charge is made for this service. 
Should it be lost, stolen or destroyed, 
notify the nearest correspondent of the 

[Page 58] 



Encyclopaedia of Banking 

issuing bank and a new letter of credit 
will be issued to replace same for the 
unused amount. 



Traveler's Checks — Many banks and Desirable. 

safe and 
convenient 



express companies have developed a ^^^^ """^ 



form of currency for use in traveling. 
This form of currency is called "traveler's 
checks." They are issued in amounts 
of from $5.00 upwards. On its face 
is the name of the issuing company, 
the amount of money represented, and 
a serial number. It is signed by an 
officer of the bank or company. 

When purchasing these checks one is 
required to sign his name on each check, 
usually in the upper left hand corner. 

When it is desired to secure currency 
or pay a bill with it, the name again 
is signed usually in the lower left hand 
corner in the presence of the party 
who is to cash the check or to whom it 

[Page 59] 



Encyclopaedia of Banking 

is to be given. The signatures must 
agree. They are printed on safety 
paper, making it almost impossible to 
alter them in any way without detection 
and are acceptable practically every- 
where. 

Act Should they be lost, stolen or destroyed, 
promptly gimpiy notify the nearest branch office 
of the bank or company issuing the 
checks and (in this connection it is well 
to keep a separate record of the serial 
number of each check as this information 
will be required) they will be replaced 
with new checks. The issuing company 
stands the loss if the name is forged. 
The charge is moderate for this form 
of protection. 

Insure Safekeeping of Securities — A bank for 
the convenience of the public maintains 
a department for the safekeeping of 
securities. A receipt is issued describing 
in full the securities deposited. 

[Page 60] 



Encyclopaedia of Banking 

The bank attends to the "clipping of a valuable 
coupons" from bonds and prepares **''*''*'* 
proper ownership certificates. On stock 
in corporations a form letter is signed 
by the owner instructing the corpora- 
tion to send dividend checks to, either 
the owner in care of the bank, or to the 
bank, for credit to the owner's account. 
The above as well as all other income is 
collected when due and deposited to the 
credit of the owner who is advised of 
each transaction. 

This relieves the owner of the necessity 
of keeping record of dividend and coupon 
dates and insures prompt collection of 
income. The charge for this service is 
moderate, depending upon the par value 
of the securities or the amount of 
income collected. 

Death of Depositor — As soon as a ^ bank's duty 
bank has knowledge of the death of a 
depositor the law prevents the bank 
from honoring any checks of the de- 

[Page 61] 



Encyclopaedia of Banking 

ceased, even though they be dated 
prior to the date of death. If it should 
pay a check when aware of the death, 
the bank is Hable to the estate for the 
amount so paid in case the total assets 
of the estate be insufficient to cover 
the debts of the deceased. This, how- 
ever, does not apply to certified checks 
dated prior to death, as they become the 
obligation of the bank. 
Gold coin Monetary System of the United 
States — Weight, 25.8 grains to the 
dollar; fineness, 900-1000, unlimited as 
to issue; denominations, $2.50, $5, $10, 
$20; legal tender, unlimited; receivable 
for all public dues; exchangeable for 
gold certificates and subsidiary and 
minor coin. 
standard Weight, 412.5 grains; fineness, 900-1000; 
aiioer dollars ratio to gold, 15.988 to 1; coinage ceased 
in 1905, resumed in 1921; legal tender, 
unlimited, unless otherwise contracted; 
receivable for all public dues; exchange- 

\Page 62] 



Encyclopaedia of Banking 



able for silver certificates and smaller 



Weight, 385.8 grains to the dollar; subsidiary 
fineness, 900-1000; ratio to gold, 14.953 *''''^'" *^"*" 
to 1. Limit of issue, needs of the 
people. Denominations 10 cents, 25 
cents, 50 cents; legal tender not to 
exceed $10; receivable for all dues up to 
$10; exchangeable for minor coin; re- 
deemable in "lawful money" at the 
Treasury in sums of multiples of $20. 

Weight 5 cent piece, 77.16 grains, 75 per ^'"®'' <^°'" 
cent copper, 25 per cent nickel; 1 cent 
piece, 48 grains, 95 per cent copper, 
5 per cent tin and zinc; limit of issue, 
needs of the people; legal tender not to 
exceed 25 cents; receivable for all dues 
up to 25 cents; redeemable in "lawful 
money" at the Treasury in sums or 
multiples of $20. 

Limit of issue for gold bullion, to two- Gold 
thirds of the amount of gold certificates *^«'-'*"«'^°*«« 

[Page 63] 



Encyclopaedia of Banking 

outstanding; for gold coin, unlimited, 
unless gold coin reserve against United 
States notes (greenbacks) falls below 
$100,000,000; denominations, $10, $20, 
$50, $100, $500, $1,000, $5,000, $10,000; 
made legal tender by act Dec. 24, 1919; 
receivable for all public dues; redeem- 
able in gold coin at the Treasury. 

Silver Unlimited as to issue for standard silver 
certincatea ^^jjars ; denominations, $1, $2, $5, $10, 
$20, $50, $100; not a legal tender; 
receivable for all public dues; redeem- 
able in silver dollars at the Treasury. 

United states Umit of issuc, $346,681,016; denomina- 
'"''^* tions, $1, $2, $5, $10, $20, $50, $100, 
$500, $1,000; legal tender for all debts, 
public and private, except customs and 
interest on the public debt; receivable 
for all public dues; redeemable in gold 
at the Treasury. 

Treasury ]\j^q further issucs; volume steadily di- 

notes of 1890 . . , . . • i i 

mmishmg by redemption m silver dol- 

[Page 64] 



Encyclopaedia of Banking 

lars; denominations, $1, $2, $5, $10, 
$20, $50, $100, $500, $1,000; legal tender, 
unlimited, unless otherwise contracted; 
receivable for all public dues; redeem- 
able in gold or silver dollars at the 
Treasury. 

Limit of issue not to exceed capital of National 
banks; denominations, $5, $10, $20, 
$50, $100, $500, $1,000; not a legal 
tender; receivable for all public dues 
except customs; redeemable in "lawful 
money" at the Treasury or at bank of 
issue. 

Issue unlimited, except by the required Federal 
security, and by the discretion of the '^^^1''^^^^^ 
Federal Reserve Board; denominations, 
$1, $2, $5, $10, $20, $50, $100, $500, 
$1,000; not a legal tender; receivable for 
all public dues except customs; redeem- 
able in "lawful money" at the Treasury 
or at bank of issue. 

Limit of issue same as Federal Reserve Federal 
bank notes; denominations, $5, $10, $20, '^'^'"^ "^'^^ 

[Page 65] 



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Encyclopaedia of Banking 

$50, $100, $500, $1,000, $5,000, $10,000; 
not a legal tender; receivable for all 
public dues; redeemable in gold at the 
Treasury, and in gold or "lawful money'* 
at any Federal Reserve bank. 

^"'"! Gold — The unit in weighing gold is the 
troy ounce. A "fine" ounce means an 
ounce of pure gold. The mint value of 
gold does not fluctuate, but remains 
constant at $20.67183462 per fine ounce. 
Troy measure is used in weighing gold. 
The grain is the same in both troy and 
avoirdupois measure, but the ounce and 
the pound are not the same. The troy 
ounce contains 480 grains and the troy 
pound 5,760 grains, there being 12 
ounces to the pound. The troy pound 
is never used in weighing gold, even 
when the weights of large quantities are 
to be computed. The avoirdupois ounce 
contains 4373/^ grains and the avoirdu- 
pois pound contains 7,000 grains, th 
being 16 ounces to the pound. 

[Page 66] 



INDEX 



A 

A Bank Account — Reconciling 28 

Acceptance Of Checks By Bank For Deposit . . 13 

Acceptance Of Draft 32 

Acceptances — Trade 36 

Acceptor 34 

Accommodation Endorsement 21 

Account In Trade Name 6 

Account — Opening An 5 

Account — Reconciling A Bank 28 

Accounts — Charges For Carrying Small .... 29 

Accounts — Corporation 7 

Against Deposits — Drawing 15 

Agreements — Escrow 56 

Altered Checks, Drafts And Notes 14 

An Account — Opening 5 

Assumed Name 30 

Attached To Bill Of Lading— Sight Draft ... 30 

Attorney — Power Of 9 



B 

Bank Account — Reconciling A 28 

Bank Book 9 

Bank For Deposit — Acceptance Of Checks By . 13 

Bearer 40 

Bill Of Exchange 34 

Bill Of Lading— Sight Draft Attached To . . . 30 

Blank Endorsement 16 

Bona-fide Holder 41 

Book— Bank 9 

Book— Check 10 

Book— Pass 9 

Borrowing Money On Security 43 

Borrowing Money Without Security 45 

By Telegraph — Stop Payment 27 

By Telephone — Stop Payment 27 

C 

Carrying Small Accounts — Charges For .... 29 

Cashier's Check 24 

Certificate Of Deposit , 41 

Certified Checks 23 

Charges For Carrying Small Accounts 29 

Check Book 10 

Check — Cashier's 24 

Check Or Note To Fictitious Person 15 

Check — Treasurer's 25 

Check By Bank For Deposit — Acceptance Of 13 



Checks— Certified 23 

Checks Drafts And Notes — Altered 14 

Checks Issued 10 

Checks — Lost Or Stolen 25 

Checks Notes And Drafts — Exchange On ... 39 

Checks Notes Or Drafts— Protests Of 39 

Checks— Post-Dated 13 

Checks — Stale 23 

Checks — Traveller's 59 

Commercial Paper — Negotiable Paper Or In- 
strument 37 

Conditional Endorsement 22 

Corporation Accounts 7 

Corporation Endorsements 18 

Course — Holder In Due 38 

Credit 42 

Credit— Letters Of 57 

D 

Date 11 

Dated Checks— Post , 13 

Death Of Depositor 61 

Deposit — Acceptance Of Checks By Bank For . 13 

Deposit — Certificate Of 41 

Depositor — Death Of 61 

Deposits 12 

Deposits — Drawing Against 15 

Discounts 36 



Draft — Acceptance Of 32 

Draft Attached To Bill Of Lading— Sight ... 30 

Draft— Purpose Of 32 

Draft— Sight 31 

Draft— Time 31 

Drafts 30 

Drafts And Notes — Altered Checks 14 

Drafts — Exchange On Checks Notes And ... 39 

Drafts— Protests Of Checks Notes Or 39 

Drawee 32 

Drawer 32 

Drawing Against Deposits 15 

Due Course — Holder In 38 

E 

Endorsee 23 

Endorsement — Accommodation 21 

Endorsement — Blank 16 

Endorsement — Conditional 22 

Endorsement In Trust — Restrictive 20 

Endorsement — Qualified 19 

Endorsement — Restrictive 19 

Endorsement — Special 17 

Endorsement — Third Party . 20 

Endorsements 16 

Endorsements — Corporation 18 

Endorsements — Partnership 18 

Endorser — Irregular 21 



Escrow Agreements 56 

Exchange— Bill Of 34 

Exchange On Checks Notes And Drafts .... 39 

F 

Face Value 41 

Fictitious Person — Check Or Note To 15 

Figures — Writing Or Filling And 11 

Filling And Figures — Writing Or 11 

For Carrying Small Accounts — Charges .... 29 

For Deposit — Acceptance Of Checks By Banks . 13 

Forgery 28 

G 

Gold 66 

H 

Holder — Bona-fide 41 

Holder In Due Course 38 

I 

In Due Course — Holder 38 

In Trade Name — Account , 6 

In Trust — Restrictive Endorsement 20 

Instrument — Commercial Paper Negotiable 

Paper Or 37 

Interest 40 

Interest On Notes 35 

Irregular Endorser 21 

Issued — Checks 10 



K 

Kinds Of Securities And Their Purchase And 

Sales 49 

L 

Lading— Sight Draft Attached To Bill Of . . . 30 

Letters Of Credit 57 

Loans 42 

Lost Or Stolen Checks 25 

M 

Maturity 36 

Misspelled Name 23 

Monetary System Of The United States .... 62 

Money On Security — Borrowing 43 

Money Without Security — Borrowing 45 

N 

Name — Account In Trade 6 

Name — Assumed 30 

Name— Misspelled 23 

Negotiable 40 

Negotiable Paper Or Instrument — Commercial 

Paper 37 

Note — Promissory 35 

Note To Fictitious Person — Check Or 15 

Notes — Altered Checks Drafts And 14 

Notes And Drafts — Exchange On Checks ... 39 

Notes — Interest On 35 

Notes Or Drafts— Protests Of Checks 39 



o 

On Notes — Interest . 35 

Opening An Account 5 

Overdraft — Overdrawn Or 15 

Overdrawn Or Overdraft 15 

P 

Paper Negotiable Paper Or Instrument — Com- 
mercial 37 

Paper Or Instrument — Commercial Paper, Ne- 
gotiable 37 

Partnership Endorsements 18 

Party Endorsement — Third 20 

Pass Book 9 

Payee 28 

Payer 16 

Payment By Telegraph — Stop 27 

Payment By Telephone — Stop 27 

Payments— Stop 25 

Person — Check Or Note To Fictitious 15 

Post-Dated Checks 13 

Power Of Attorney 9 

Promissory Note 35 

Protests Of Checks Notes Or Drafts 39 

Purchase And Sales — Kinds Of Securities And 

Their 49 

Purpose Of Draft 32 



Q 

Qualified Endorsement 19 

R 

Reconciling A Bank Account 28 

Recourse — Without 22 

Restrictive Endorsement 19 

Restrictive Endorsement In Trust 20 

S 

Safekeeping Of Securities 60 

Sales — Kinds Of Securities And Their Purchase 

And 49 

Securities And Their Purchase And Sales — Kinds 

Of 49 

Securities — Safe Keeping Of 60 

Security — Borrowing Money On 43 

Security — Borrowing Money Without 45 

Sight Draft 31 

Sight Draft Attached To Bill Of Lading .... 30 

Signature 8 

Small Accounts — Charges For Carrying .... 29 

Special Endorsement 17 

Stale Checks 23 

Stolen Checks — Lost Or ... 25 

Stop Payment By Telegraph 27 

Stop Payment By Telephone 27 

Stop Payments 25 

System Of The United States— Monetary ...» 62 



T 

Telegraph — Stop Payment By 27 

Telephone— Stop Payment By 27 

Their Purchase And Sales — Kinds Of Securities 

And 49 

Third Party Endorsement 20 

Time Draft 31 

To Bill Of Lading— Sight Draft Attached ... 30 

To Fictitious Person — Checks Or Notes .... 15 

Trade Acceptances 36 

Trade Name — Account In . 6 

Transferree 38 

Traveller's Checks 59 

Treasurer's Check 25 

Trust — Restrictive Endorsement In 20 

U 

United States — Monetary System Of The ... 62 

V 

Value — Face 14 

W 

Without Recourse 22 

Without Security — Borrowing Money 45 

Writing Or Filling And Figures 11 



%KP 1 1 19tt 



